A firm that is earning zero economic profit should go out of business.

Question

Quizplus · Accepted Answer

A firm earning zero economic profit is still covering all of its explicit costs, including wages, rent, and utilities. It may have made a choice to forgo potential profits in order to maintain market share or invest in future growth. Additionally, shutting down a business incurs additional costs such as severance pay and may result in the loss of valuable assets or relationships. Therefore, it may still be beneficial for the firm to continue operating even without earning economic profit.

A Firm That Is Earning Zero Economic Profit Should Go